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tv   Street Signs  CNBC  February 1, 2013 2:00pm-3:00pm EST

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all right. we are at session highs for the dow jones industrial average. if you are along this market, it is a good day for you. up 150 point at 14,010.65. we were at 14,165. we have confirmation from some of the other indiesys as well. >> we will see you when you get back it inglewood cliffs. >> thanks. >> thanks for watching. >> "street signs" begins right now. >> this is cnbc breaking news now. >> welcome to "street signs." after five and half long painful years, dow 14,000 is back. tonight, maybe we can make merry. but then we wonder, is this time
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really different than 2007 or is there reason to worry again? how did we get back to this milestone? plus, you will not believe which of the companies is one of the worst this year and is netflix's big bet on a new show a big bust, mandy? >> currently hitting session highs today. and in addition to the dow cracking 14 thousz, first day of february is seeing the second best gains of the year for all the major averages. best occurred back on january 2rd but first trading daep day of january and up 2013, by the way, first time true think is the farm so far this year. dow is up 2,000 points since hopium debuted. just sayining with folks, just sayin. what do you think, bob? are the ingredient in place to keep this rally going? >> yes. but we need things fixed first. we need gdp and revenue growth. we aren't going anywhere in a bull market without that pch we
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need clarifications on policies from washington and europe. we need to see the fed engineer some rise in creating run away inflation, mandy. i know is a tall order. companies will be more optimistic and they will start spending ghen a big way. that what we need. here you see the dow at 1412. up to the highs for the day. people have been writing in saying what the heck, bob. an great unemployment report. let me give ut four point here that i see for the rally. i agree with them. it is not a particularly great point overall. number one, first day of the month. i think that the most important thing. if you put up the big screen, i will show you. we see the market move to the upside today. secondly ism and consumer confidence numbers quite strong. i know that doesn't get as much publicity but those numbers were excellent. china's manufacturing numbers came out. still in growth territory.
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and if higher enploimt rate means continued fed stimulus. mandy, bottom line is, there are a few reasons why the market would be up today. back to you. >> thanks, bob. prs. >> certainly an important psych lomg cal level, right? here as you know, we like nice, round numbers. but we have been famously here before end itened in tears. is this time different in scott, ceo of googen heim. turning on stock two years ago, not because we are that smart, because we listen to guys like you and your calls which have been spot on. shine your crystal ball for us again. are we having another big drop like 2008 or is this time really different? >> oh, this time is really different. i liken this period to something like 2004 where we recovered
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losses from the recession but yet we have a fed that is just continuing to pump liquidity into the system and while i don't think the market gains will be as dramatic as the last three years, i think there will be a an appreciation in the dow during the course of the next three years. >> what could go wrong, scott? >> well, you know, that's a great question. there's a lot of stuff out there that is a problem longer term. you know, let me give you my first concern. is that we won't have a sequester. i think a sequester will be good for the market pip think it will send a signal that policy makers in washington are serious. about structural reform and that they are going to do something to reduce the size of the deficit and if we don't under v a he is quest earn we get another compromise that considers raising taxes or does
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something other than address the structural issues, i think that will be negative for the market in the near term. >> wow, 35% gain in the dow in a couple of years. scott, you're big guy but those are pretty big numbers. is this more hope yum or is it real old-fashioned earnings growth? >> i think that earnings growth, brian, we have sort of run the course on that. i think that there could be modest growth from here but best days of earnings growth are behind us for now. i think it is plain old-fashioned and i was in davos last week. i ran into steve liesman there. he wanted to get me out for a drink, but you know how hard that is. anyway, you know, i think that the consensus is that the crisis is behind us. not just the european crisis but
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the whole crisis. and this relief we are having gives a sense of euphoria and is pushing us higher. and i don't see anything standing in the way after serious pull back until we get saip up around 1575 and then i think we're going to out for a while. >> for the investors perspective bb what is the best way to play those game you are predicting. >> well i am still bullish on equities. in december you asked me for a crazy ada and i told you pain was pretty loco and it is about about 8% and we have a lot more room to run in spain. japan, given what avi is doing? japan. >> have you been talking with brian sullivan? that one of his 2013 predictions. i think he is doing his victory lap and it is only february 1st. >> i made that prediction last year. what do you think?
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>> i think that you're dead right, brian. if you want a job at googen hiems, giver mae heads-up. we would love to even a blind squirrel finds aness once in a while, scott. >> let's talk about this aspect. everybody was so negative a few years ago. one of the reasons we kurned positive, right? i'm starting to get a little bit nervous the other way, rye? the housing market is looking better. everybody seems to be now runnings the other way which unfortunately makes me nervous and feels like could be a tough year. >> you know, broi be a, that why i was saying we have enough momentum to carry us higher. what bob pisani was talking about, it is going to push us higher by another 4 or 5% near
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term. but i do think that we have to do some digestion of this gain over the course of the summer. and you know, she said the euphoria is scary. you know, it only bothers me, a lot of people say to me that aim a contrarian. it does bother me when everybody agrees with me. that was was the most disturbing thing i saw. >> we have done this segment before on "street signs." you weigh in as well. can yields reece as stocks rise at the same time? >> mappedy, absolutely. our work here actually shows, that rising interest rates, until you get above 4% on the 10-year note are usually associated with period of rising price answers that's because a 4% treasury rate would be reflective of a strong every
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economy with modest inflation. once you get above 4%, more and more of the increase is attributable to inflation increase. right now inflation san problem for us and so real growth would drive interest rate higher and probably drive equities higher. >> so if you're right aep the tou powers higher or we pit 4% of the ten-year, there's your sell signal? >> i would definitely call that a sell signal, brian. i think if we get much -- i think if we got much above 2 .3/4% on the ten-year, i would would want to visit my note. >> before do you think the ten year will end up at the end of this year. we will prob somewhere close to where we are today. maybe slightly higher. and i think in 20014 we are probably going owe see it move meaningful higher, maybe in the
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neighborhood of 3% or so. >>. >> thank you for being on the show. >> thank you. >> are you feeling wealthier? we will dig into who is benefitting from this rally. >> plus, netflix's house of wards. why the big $100 bill million bet is getting two thumbs down.
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did the data today on jobs
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help fuel the rally the dow to 14,000? let's bring in dan greenhouse. also michael from permanent portfolio funds. dan, to what extent was the jobs number today a goldy locks number for the stock market in that it wasn't fantastic. kind of the number that is going to keep the fed in play withity foot on the gas pedal. >> i think that's exactly right. right after the report came out, bobby, who runs our event driven team, said why are we jumping so much on this. the report in the context. where he are today. income up. job growth positive. but the at end of the day, the type of report that leaves the economy growing at a rate that leaves the federal reserve involved. if you were concern had about the economy, you are concerns are elayed. if you are confirmed about the fed, your confirm is elayed. >> is the stork market keepingity foot on the pedal, dan? >> certainly the bias is to the
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joup side. the economy is expanding and profit are going and all of the other things. but again there is nothing that is reported that suggests the it is set to break one way or the other. >> a little conservative, not known for making huge calls, he made one. a gain for the next couple of years. do you agree with him? >> i think it could happen if you have the right cirques in place. which means the right infrastructure. government reform. tax reform. and continued -- what you need is the animal spirits of the u.s. economy to come back. i don't see evidence of that myself. i think the other guest on m me right now, hitting it on manned e's report. a goldy locks report in that things are fin for the moment. . the feds still involved and that great. the question is when do you get off. equities run up quite a bit in the last year and what half and
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i could see a slow down coming up. this january looks like the three three januarys at this point in time. i'm not overly apt mystic as well. i might have a slightly different take on things right now. >> mike sb is there one particular cells signal i should watch for right now. >> i don't know about the previous guest ten-year target, but i think what happen says if rates rice, especially caused by the bond market self and not the fed or other central banks around the world, that could choke off u.s. economic recovery quickly. the other issue is while jobs appear to be growing they don't appear to be growing at a rate that's going to provide that big aggressive move in the health of the economy. they are growing a the a maintenance level. the vagueries of the calculation not with stanning hasn't moved. and my suspicion is unemployment will be stubborn or around these
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levels. i think you need that to do down and get the animal spirits back in the economy. if that were happen, sure. higher dow and higher s&p. but i'm not real but a view that's been pervasive and i think after four years of lower and lower interest rate. not that i don't think interest rates should be higher this year or next but a rapid rise in interest rate which scared everybody for years now is no more likely in 2014 than it was in 2012 or 2011. >> here is the conundrum we face with rates, is this. higher rates ask choke off parts of the economy. but rate often go up when the economy is expanding and improving. is there a bright line. >> that we can use to know what is good and bad at a higher level rate. >> no. each cycle is different and each
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reals rate is different per cycle. i get into fight with people all the time about this. what if i told you today that three years from now, the fed raises interest rate, and racing by 425 basis points. where would their responses be? oh, most say oh, their hair would be on higher. the stork et market went up an diasianal 40%, higher rates are good for the economy, proving the fed is on top of their game. >> i would agree -- >> go ahead -- >> no, no, i would agree, gradually rising interest rate are part after healthy growing economy. i would agree like that and there are interest rate with no end in site and if the stock market is spooked with 1 percent to 4% then we have a major problem in long-term i because i
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can guarantee that from here to eternity, interest rate are not going it stay this low. >> absolutely. and it if i'm an investor, obviously personally i can't invest here at cnn in stocks. but if i could, where should i put my money, michael? >> well, we would at with the fed money with corporate earnings being strong and q4 earnings are bet are than some of us expected. stocks were good. but they could correct and so i think you need to be careful of that. we advocate some bond exposure in case we have reception or slow down or another balance sheet crisis and the shorter the better in terms of dir racing at this point. not by the fed but by the market itself and advocate some composure to commodity, especially gold.
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and really a mature insurance policy. >> there is no -- okay. i want to switch gears. we are running out of time. i want to talk something we were talking about via e-mail this morning. and it is kind of bugging me. revikss are great. we want more jobs than not. but i put out a piece on about two hours ago but who do we make numbers more secure? you told me that some first look numbers, you almost have to ignore because revisions are all over the place, right? we know why. you can't remember people to be sewer vaded sometimes. what do we do to fix that and make us have more confidence for economic data? >> there is nothing can you do. eye ra and i talk about this day after day, year after year. dennis is fond of saying he is not even in the office when the first record is released. the truth is whatever the final monthly job creation number is,
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it is going to bear almost no resemblance to what is released. and the stock market jumping up or down or one way or the the other is that report is so unreliable, it is virtually worthless. >> why do we place so much importance on it year after year after year. maybe we shouldn't. >> mandy, i won't clan, it is how i get on tv to come talk to you. i'm not going it complain, such is life and the realm of statistics. you won't be right all of the time. >> thank you very much, dan, thaks you very much, michael. oil's big move after the embassy bombed in turkey. >> apple officially becoming america's top mobile phone maker. but will it be enough to stop the stocks slump? [ wind howls ]
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now details on a developing story. bombing turkey's capitol, a turkish was also killed. a local terrorist group is responsible. the u.s. state department is telling americans to stay away from cons lates there. the oil market there reacting to the attacks. let's get more from sharon epperson. how are we seeing this play out? >> it is playing out very strongly. crude prices at their highest levels in four months time. right around 117 a bare people prices have risen more than a dollar on this news. traders are watching it very carefully because of course middle east tension often cause a rise in oil prices pfr we are looking at wti oil prices here. the u.s. also rising as a result of this. but keep in mind those gains
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have been muted. we have plenty of oil in the u.s. and there is concern about a key pipeline that was supposed to take crude from texas being delayed and being at full capacity until the fourth quarter. we have seen changes with the bomb here to the u.s. in 2007 where oil stood at last time the dow was at 14,000. back then, we saw tro pro ducks levels around 8.5 million barrels a day here in the u.s. now at 11 million per day. back then, prices 80 bucks. now at 98. that has to do with the fact that oil and equities seem to be moving quite a bit in tandem. back to you. >> sharon, thank you he much. and keeping with the rally and theme today. as well as an angle. fill is join issing us and phil i said i thought front to back, forth had the best looking group
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of new cars of any car maker out there. seems like customers agree. >> they had a soiled month. no doubt about that, brian. we will go over ford numbers in a bit. but first off, news that rhonda report january sales with increase of 12.8%. honda seeing a big game forty new accord. as we see these new come in and auto makers in wab keep this in mind. most of the gains we have seen, they are the best since january of 2008. an indraes of 26 pbt 7 spers way above east mates. what is driving all of this. right now we will see a sales rate for the month. poins of. pint up demand we have seen the last few months there is another interesting fact in the auto sales. pickup trucks seem to be edging
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higher. it is too soon to say this is the construction market rebounding but there is no doubt there is strength in the pickup truck market we haven't seen in some time. take a look at shares of gm and ford. some other auto stocks have had a bit after more robust rally in the last couple of days then you have seen from gm and ford but skeep in mind these guys are tied to what is happening in europe. as long as europe is a mess for auto makers, that will weigh on the stocks. but january off no a strong start. >> and we call those pickup trucks yutes. at the back of the yute. when is that pint up demand spent? is there anything in -- >> we are a ways off yb mandy. if you look at the average age of a vehicle in this country, it is still over 10 years. 20% of vehicles over 16 years o old. it will take time to get rid of all this. >> that's amazing. it is great but also the auto industry almost doomed it self by developing cars that are too reliable. >> i don't buy that, brian. you know what will happen --
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>> you don't buy cars because your is running for 15 years. >> no. you say, i want connectivity. i want latest advancements in technology. if i'm driving a 2003 model right now, i'm looking around going, it is working but do i want the other technology, yes. >> phil, i drive a 2002 pb. >> i drive an '03. >> i put $750 into a new stereo system. it has blue tooth and -- you understand what i'm saying. there is a point where you have to replace the stuff. >> that demand for technology will draw the vehicle demand. >> i think phil, i'm demanding the return of the alliance. right now on this show, we need to bring it back. six months and out. >> i will let you stand alone. >> yeah, i am standing on the side of the road because the car
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is broken down. >> i'm out of it. >> the obesity edition of street talk. >> plus, why we call tht richie rich rally. mission a for a fina. this is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers.
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friday street talk. let's look at dell back in the news. >> really. i know a lot of people out there thought no way could dell ever be bout out by private equity. get what? reuters talking about not only could a deal potentially happen but could happen as early as monday. yeah, can you i animal in. that would be a gigantic -- i know a lot of bankers and lawyers who would be happy about that. >> and co-founder michael dell and partners, is that right? >> yes. >> okay. ap inbev after the whole doj thing. . what is going on today? ? >> bernstein grading the stock. saying listen, the drop yesterday ended stock trading at premium to its peers. it is now a better value. and they note this. the worst case scenario is a return to the predeal announcement back last year when they announced the deal. according to bernstein, only up
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side here. >> and oracle, on your 2013 predictions list. >> yes, part of hpo. well, we'll see. bmo upgrades, market perform. investor meetings on wednesday. and the growth outlook have improve had yerlly because data prize spending should recover from 2012. i know other companies beside oracle will be happy. >> and again, higher again today. >> their weight loss drug has gotten a lot of casimia. this drug significantly improves cardio disease risk factors. that seems obvious rb right? ? >> you lose weight. >> you have a healthier heart. >> but it was the volume of the improvement that got investor's attention. this is a tp where a dig time share holder is pressuring about being smarter and collin thinks
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that's also a stock off, 2.3 of that percent. >> lots and lots of news about this next stock can which is phillips. >> i today do a double take. >> huh? >> yeah. when i saw the numbers come out. beating earnings by 39 cents above the consensus. also say they consider openings of california refineries. raising the tark et to 75 from 60. they see 35 pch phillips relatively new company in the market. is it about 80 -- look at that. 84%. >> over the past year. >> wow. i'll take that. in the meantime, dow pushing through the 14,000 mark today. how exactly did we get here? we have to do some rewinding. history sar muching and thank god we have the latest. jackie. it is fun to look back at history and of course with the dow crossing 14,000 today many investors wondering what happened since objector 2007 peak. truth be told it wasn't a round
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trip nowhere. clever investors made money if they invested in dow component like home depot, ibm. also disney. home debow vo wo have made you a return. how would you know which stocks to pick. if you look to the top three stocks driving the dow through 14,in 2003 you would say were a three technologies. peak to peak, 20%. 10% in utx if you stuck with alcoa. you would have lost 77%. what we see is leaders into the rally weren't the ones that came full circle. let's flash forward to now. top three dow performance that led us to this point in the rally. bank of america, home depot, disney. hp gaining 3% and disney up 36%.
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those might seem like traffic returns. the milestone drivers may not necessarily be the same stocks that you will wish you will own. bell have this conversation ats the next peak. >> we got to make it trick oo. great stuff, thank you very much for the historical background, jackie. >> how the world's biggest money manager is playing there rally. >> and the real reason you may not feel any richener this rally. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine. at legalzoom, we've created a better place to handle your legal needs.
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coming up on the closing bell, will the dow close above the 14,000 level? we will count you down to close with some of wall street's top money managers. plus pimco's bill gross joins us. and bob doll calling the rally. find out his next big prediction. first to "street signs," guys? >> we will throw? some suns shines for you today. i brought it all the way back from san diego for you. right now, up by 6.5% on earnings. eps of 26 cents topping estimates sales 1.1 billion. also, about the consensus. crane revenue up high. single digits. that is a sentence i never
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thought i would say. >> mechanical or bird? >> the orguaymi bird from japan. >> good enough. >> no sunshine there. about 30 degrees in wisconsin today, below 0. markets moving higher with hedge funds and world's biggest money manager riding the rally. cape kelly to tell us where they are putting their money -- who? >> we are talking about everyone. hedge fund, pension funds and world's biggest money manager. let me start with hedge funds. today i've been talking to folks about who called this rally and have ridden it straight up the dow to 14,000 as of today. leon cooperman is one of the ring leaders. bullish equities for more than a year and has returns to prove it. i'm sorry. also up about 5% for the month of january as well as being up nearly 30% for 2012. also, third point in flag ship funds with a terrific january at least in part on up swing on
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long positions. that's on the heels of 2012 performance north of 20% for each of them as well. i called some of the biggest money managers to see what they are thinking in terps of td and what next. daniel who runs blackrock etf business says to fasten your seat belts. he thiz the equities rallies are likely to continue win vestors favoring china, south korea and mexico in particular but thinks it could be a volatile ride. and set backs could be nearing. still, there is real money throwing in and with $42 billion of a-shares, just marked their best january ever. es is he says managers are shorting credit emerging market credit. a merrill report citing a trough about a decade low in equity pension fund investment. however another report just issued today says the third biggest week ever for equity fund inflow in general is the week that just ended. >> how about that. i wonder if it with a a
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contrairon indicator. >> is the correct coming? gamba says look for volatility -- he didn't say that on u.s. stocks but it seemed implied. meshl is signalling that they expect to see a correction. is there a possibility of that in near term? >> a lot of people think that a correction of a small magnitude might not be a bad thing. thank you very much for that kate kelly. robert frank has been patiently sitting here with us as well. why are we calling tht richie rich rally? >> because the rich are benefiting. but if you're not feeling rich with the dow at 14,000, you're not alone. only about a third of americans on more than 10,000 in stock. average americans won't get as much of a boost from this rally as the wealthy. americans hold more than half of the directly held publicly traded stocks in america. get this, top 5% own 82% of directly held stocks. yes, average americans will see
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their 401(k)s improve. but the wealthy own far more of the nation's over all stocks. comes down to wealth portfolios. top 1%, most wealth comes from investment for average american most of their wealth comes from their homes and homes have not recovered like stocks. here is the tale of two recoveries. financial assets, back near their peaks, home values still bumping along the bottom. that difference is why this rally may ring so hollow for many americans. average investors around 18,000 in the market at the end of 2011. that's down from 2007. but wealthy investors saw their market fortunes increase by $63,000 the same period. dow down 14,000 but for the rest of america not so much. >> i'm going to fight with you a little bit on this one. even though i like you very much. >> nice. bring it on. >> i hate these stories where if you open something and the price
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goes up, you get richer. of course the wealthy will benefit more because they have more excess cash with which to invest. >> the important broader point here is that we are talking a lot about correlations today. there used to be a closer correlation between the stock market and over all economic growth and overall financial wealth of americans. right now because of these two tracks where you have homes still stuck in the bottom and stocks going up since 2009, you never had such a decupeling in the fortunes of 1% and the rest of america. i'm not saying it is right or wrong, but i'm just pointing out we never add disconnect between numbers and reaching an all-time high and most americans are looking at this, what? >> by the way, mr. greenburg might say -- >> by the way -- anybody where a pension fund that you just talked about, kate, they are benefiting. they don't have a 401(k) or own ibm stock on mass or whatever but if their pension fund for a
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state, rhode island state, whatever it is, benefits more and becomes more solvent, they -- >> they do benefit. >> when you look at their household finances stocks aren't as much of a factor in the overall pie. >> here is the things from the poor. the thing that the traders i talked to are looking at is when do we see a big shift of money not just coming off the side lines in other word from cash but big rotation. a lot of people say you're a dummy if you stay if bond in this environment. if we have sound from leon cooperman, let's deliver it. because this is what he says with sharp words in why to look at equities. >> do we have it? >> stocks are cheap against inflation, cheap against their own history, cheap against interest rates. and they are allowing for slower secular economic growth and
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allowing for higher interest rates. buying it is like walking in front of a steam roller to pick up a dime. just an very advisable policy. >> brian, do you love that? walking in front after steam roller to pick up a dime. that what you are doing if you invest in fixed income. you've got look at equities. >> would that great rotation be bigger than the cash on side lines? i don't have any idea how much is in the bond market versus how much is under the mattress. no one probably da z. >> it is hard to guess for the entire market. if you look at the fund flow data, you will see people are favoring equity. there was a huge inflow in the middle of january, about $62 billion in equity in the last two months with a big upsurge. bond about 50 billion so not as strong but still up there. in terms of cash, i don't have that figure but the question is like when do you actually start it favor something over something else versus, let's put something to work because we like the direction.
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>> we need a mattress money counter. someone that goes out there and looks under every mattress and gets verifiable data. >> a dime in this case. >> thanks, great stuff, guys. best of times, worst of times as the market sees the best since 2007. guess which stock has done the best and the worst so far this year? >> one of them is banking on a house of cards. here is your hint. [ indistinct shouting ]
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check this out, folks. 2013's worst s&p 500 performer is apple. down about14.5%. the best though is netflix. it is up about 82.5%. jon fortt, can apple turn it around? >> i think apple can. i was locking at a lot of these stats just yesterday taking a look at how far down apple went in a month. it turns out over the past 11 or so years, since the dotcom bust, if you leave out 2001, apple only dropped more than 14% four times in that amount of time, and never one of those times were the s&p and nasdaq both up
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in a month when apple was down that much. so this is such an anomaly. you've got to think -- >> you know, we sort of on this show coined of phrase rodney dangerfield rally about the stock market rally getting no love. apple is the same way. when you look at the metrics, price to earnings, price to book, cash to enterprise value, all these things, trading at a discount to companies that should no way be in the same breath as apple. >> just looking at the data, and it turns out january and september showed up an awful lot for the big plunges in apple which makes me think are there certain times of the year when people's bearish sentiments about the stock took over? this isn't the first time that people were worried about scaling down in iphone orders. people were worried about things like margins, actually back in september 2008, two major analyst downgrades sent the stock plunging because they were saying the margins are going down and not coming back. >> talking of rodney
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dangerfield, maybe we're getting too much respect leading up to the peaks in september and correcting down to what it should. >> who is the inverse of rodney dangerfield. >> roger dangerfield is. >> you took the red eye home last night. >> speaking of roger dangerfield, rodney, sorry. i got two hours sleep. >> just breaking your tops. how was it in the cargo hold? >> clinging to the other side of the wheel. >> original content debuts today called house of cards. netflix is taking a risky strategy which could be a game-changer for the streaming giant. julia boorstin is in l.a. besides producing big shows, what is the big risk that they are doing, julia? >> here's the thing about house of cards. it's netflix's first original series, and the company is releasing all 13 episodes at once. it's trying to play into the way people stream netflix which is binge viewer. the political thriller "house of cards" is costing netflix $100
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mill for two 13-episode series, the first content created just to stream on netflix. past of ceo reed hastings' big plan to distinguish netflix with high quality content as you would see on showtime and hbo. shares are trading higher today on expectations that the new show will draw in new subscribers, but the strategy of releasing all 13 episodes at one time. that's in contrast to hbo which keeps people watch month to month to watch the end of "game of thrones." on the "today" show this morning kevin spacey, who stars in "game of thrones" says netflix is giving people what they want. >> so many times i'm hearing friends of mine saying i stayed home and watched two seasons of "breaking bad," watched two seasons of "dexter." >> now we'll have to see if
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people want to sit down and watch season after season of "house of cards." now, "house of cards" has a rating of 70 out of 100 on mediyettic which is pretty good and we won't get any actual ratings or official results of how well it's down from netflix, but we'll be watching to see whether netflix's streaming volume increases over the weekend. we'll bring that to you on monday. >> thank you so much for that. right. what happens if the show and the idea to generate original content folds? joining us now is rich chuolo, the director of research and herb, our friend as always. rich, what do you reckon? >> okay. so in regards to "house of cards," kevin spacey is an actor, lead actor on average generates about $10 million in the box office which translates into about 1 million people, kevin spacey fans, that they -- that they can, you know, count on. it costs $100 million over two years to produce the show.
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they will need 2 million incremental subscribers just to break even on this show. the way they are doing this show is risking up the business model, and heer's why. most tv shows, "walking dead," big, successful shows, they take a year or two to build up the traction to be successful, all right. "house of cards" needs to really, in order to deal with other problems that netflix has, has to be about 50% more successful than "walking dead. ". >> the when you say risking the business model, basically saying it will put it in financial distress if it doesn't work. would you agree, herb? >> this among other things. >> some people would argue it's already in financial stress if you go off balance street. intrigued with something rich put out today and that was this concept that netflix could actually go out and buy amc which is -- you put this out. >> huh? >> amc networks. >> listen to this.
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>> think about this. >> buying -- >> think about it this way, right? what's netflix's biggest problem? >> content. >> no. they have content. >> costs too much. >> other people's could be tent. >> they are not monetizing at the rates to afford the content. they are not monetizing it. >> what is their biggest problem if it's not? >> it's the cash flow, right. so in media content is king, cash flow is queen and distribution is the court, and you need a happy court all together to build an empire, right? >> so you're saying they have two of three. they have the two things, but they need cash flow generation. amc generates about $500 million a year in cash on about $1.5 billion a year on revenue, so for every dollar in revenue, amc generates, they generate 30 cents in cash. netflix, for every subscriber they have, they generate about a penny a month, okay? international, they lose dollars on those subscribers. >> rich, they -- dvrs, dvds, the
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big cash-flow generator but do you really think or anybody really seriously think that dvds are going to exist five years from now where they can generate 8 million subscribers on dvds? that's been the big cash cow. that goes away. they need to generate four streaming subscribers to make up for every dvd subscriber. >> making a bid for amc. thanks so much for joining us. you've got a price tag of 68 bucks on netflix. >> all right. get your game face on. wait until you see what's back? a hockey mask with a chainsaw. just normal family stuff. we're back right after this. tdd#: 1-800-345-2550 this morning, i'm going to trade in hong kong.
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